Affymetrix Sued by Tang Capital for Fraud Over Merger Terms

By Karen Gullo -
Dec 30, 2011

Affymetrix Inc. (AFFX) was sued for fraud
by investment firm Tang Capital Partners LP, which claims the
maker of genomic analysis tools misrepresented the financing of
an acquisition for which it depleted cash meant to repurchase
$95 million in notes bought by Tang and other investors.

Tang Capital, which purchased $78 million of Affymetrix’s
3.5 percent senior notes from 2008 to 2011, alleged in a
complaint filed yesterday in state court in San Jose,
California, that the repurchase money is being used as
collateral to finance Affymetrix’s acquisition of eBioscience
Holding Co.

The $330 million cash deal was announced Nov. 30. The
merger triggers a repurchase provision in the note contract that
Santa Clara, California-based Affymetrix has refused to honor,
Tang said in the complaint. Lenders financing the acquisition
have first priority over the $95 million that should be used to
repurchase the notes after the takeover closes, a fact that
wasn’t disclosed to Tang Capital, according to the complaint.

Tang seeks to represent other investors and asks in the
complaint for a court order blocking Affymetrix from
transferring the $95 million or assigning priority interest in
the money and other damages.

Affymetrix said in a regulatory filing yesterday that it
believes the suit is “without merit” and it plans to complete
the eBioscience acquisition in January.